The no-show underlines the challenge the Modi govt faces in fixing the debt-laden state carrier, as well as meeting a broader target of PSU stake sales.

NEW DELHI: NEW DELHI: In a major setback to the government’s disinvestment agenda, the proposal to sell a majority stake in national carrier Air India failed to attract any takers.

“As informed by the transaction advisor, no response has been received to the Expression of Interest (EOI) floated for the strategic disinvestment for Air India. Further course of action will be decided appropriately,” the aviation ministry tweeted on Thursday, the deadline for bids.

The government had called bids for a 76% stake in Air India, which includes 100% stake in low-fare international subsidiary Air India Express and 50% holding in ground handling company AISATS.

The government had extended the deadline for bids to May 31from May 14 and had targeted completion of the sale by December this year.

Aviation secretary RN Choubey said the government had expected a better response.

“It did not meet the expectations of participation that we had,” Choubey said. He added that a panel of ministers headed by the finance minister would decide on the future course of action. “Inputs will be taken from the transaction advisor on what went wrong,” he said. The plan is to approach the ministerial panel for solutions within a couple of weeks, the secretary said.

Choubey did not answer questions on whether the divestment process would be scrapped due to the Lok Sabha elections scheduled by May next year.

The reasons that may have affected interest in Air India are said to include total debt and liabilities of Rs 33,000 crore on the books of the airline and the government’s retention of a 24% stake in the entity.

There will be no interest in bidding for the airline unless the government decides to sell 100% in Air India, an airline official said on condition of anonymity.

“Forget 24%, investors would not find it comfortable even with government retaining 1% stake in the airline post-divestment,” said the executive.

Analysts said they expect the government to start a comprehensive restructuring of Air India. “We treat this as a significant failure. Next steps should include a comprehensive restructuring of AI under a special administration, which can be followed by 100% divestment with less complex terms,” said Kapil Kaul, CEO and director for CAPA, an aviation research and consultancy firm.

Kaul said dropping the divestment plan at this stage would be “unfortunate” and that he expects the government to quickly address structural issues and resume the process at the earliest. The cost to the taxpayer will be massive with continued government ownership, even in an election year, he said, adding that he expects “strategic clarity” from the government.